Qutoutiao(QTTOY) - 2018 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2018, the company's revenue reached RMB1.3 billion, exceeding the high end of guidance and representing more than five times the revenue from the same period a year ago [31] - The total revenue for 2018 exceeded RMB3 billion, almost six times the revenue in 2017, which was just over RMB0.5 billion [30] - The average revenue per user (ARPU) was nearly RMB0.47 in Q4, slightly down from RMB0.5 in Q3 2018, but up from RMB0.29 in Q4 2017 [32] - Non-GAAP net loss was RMB367 million, with a non-GAAP loss margin of 27.6%, improved from 30.5% in the previous quarter [36] Business Line Data and Key Metrics Changes - The average monthly active users (MAU) reached RMB94 million, growing 286% year-on-year and 44% quarter-on-quarter [6] - The average daily active users (DAU) reached RMB31 million, representing an increase of 225% year-on-year and 45% quarter-on-quarter [7] - Midu, a new product, attracted 40 million installed users within six months of launch, with a DAU of 5 million by the end of December 2018 [16] Market Data and Key Metrics Changes - The company has become a significant traffic portal for lower-tier cities in China, with 70% of Qutoutiao app users based in tier three cities and below [9] - The total installations of the Qutoutiao app reached about 300 million, indicating substantial penetration potential in a population of 1 billion living in tier three and below cities [19] Company Strategy and Development Direction - The company aims to enhance its content ecosystem, improve social features, and optimize unit economics to connect with grassroots populations [21] - The strategy for Midu includes becoming the leading online literature app and building a writer ecosystem to foster original content [26] - The company plans to diversify revenue streams into areas such as paid subscriptions, live streaming, games, and e-commerce to create a balanced revenue mix [56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic headwinds in the advertising market but noted that performance advertisers, who make up the majority of their revenue, are likely to increase spending during challenging economic times [54] - The company expects net revenues for 2019 to be between RMB7.5 billion to RMB8.5 billion, compared to RMB3 billion in 2018, indicating strong growth momentum [44] - Management anticipates that the user acquisition costs will continue to decline due to improved platform capabilities and content offerings [60] Other Important Information - The company has implemented a loyalty program that enhances user engagement, with the monetary value of loyalty points being minimal but effective in building customer loyalty [42] - The company is exploring AI-assisted content production to reduce content production costs and improve margins in the long term [99] Q&A Session Summary Question: What is the unit economy for the new Midu app, and what is the plan for Midu regarding investments in user acquisition and retention cost? - Management clarified that Midu has no engagement costs for users and expects the acquisition cost to be similar to Qutoutiao, with a payback period of 6 to 9 months [50] Question: Does the slowdown of the advertising market pose any threat to Qutoutiao's revenue growth in the first half? - Management noted that brand advertisers are less than 5% of total advertising revenue, and performance advertisers may increase spending during economic challenges, making the company relatively insulated from macro factors [54] Question: What is the reason behind the decline in user acquisition costs? - Management attributed the decrease to improved platform capabilities and a technical approach to user acquisition, which enhances efficiency [60] Question: How much of the user acquisition spend is for Qutoutiao versus Midu? - In Q4, the user acquisition mix was approximately 80% for Qutoutiao and 20% for Midu, with similar unit acquisition costs [69] Question: What is the status of the short video app? - The short video app is currently being tested with promising user engagement data, and a wider launch is expected in Q2 [77] Question: How will the company maintain its leadership in the online literature market? - Management emphasized the challenges of replicating the free-to-read model and highlighted their efficient user acquisition, retention, and monetization strategies [86]